Monday, 3 April 2017

The myth about 'public health' saving money

An article was published in the British Medical Journallast week which claimed that £1 spent on 'public health' saved the NHS a multiple of £1 in the long run. Return on investment ratios of 8:1 or even 14:1 were discussed.

All total nonsense and a massive misrepresentation of the economics literature. To explain why, I wrote this piece for Spectator Health:

The reference to the ‘wider health and social care economy’ is a clue
that we are not dealing with hard cash here. Nobody could argue with
spending a billion pounds on public health if it extended people’s lives
and saved £14 billion, but that’s not the proposition.

In reality, the investment requires real money that comes out of the
taxpayers’ pocket whereas the return is measured by giving a theoretical
monetary value to a year of life and multiplying it by the number of
years that are thought to be added by public health interventions. In
this instance, it was assumed that an extra year of life is worth
£60,000. So, if a £2 billion preventive health initiative leads to one
million people living for an extra six months, the return on investment
is £30 billion.

That is all well and good, but it is not a £30 billion saving to the
taxpayer. The cost is financial whereas the benefits are non-financial,
albeit put in monetary terms for the purposes of an exercise. There is
no financial return on the investment. On the contrary, by extending
people’s lives the intervention will almost certainly lead to higher
costs further down the line.

And yet, despite their article being a blatant appeal for more taxpayers' money (eg. 'The UK government's ‘efficiency savings’ thus represent a false economy
which will generate many billions of additional future costs to the
ailing NHS and wider UK economy') they declare that they have no conflict of interest. Really?!

PS. If you want to see what the economic literature on preventive health actually says, read Death and Taxes.

The flu jab blunder which contributed to the largest spike in
deaths in a generation may have brought unexpected benefits for
Britain’s pension black hole, a new report suggests.

Latest projections from the The Institute and Faculty of Actuaries (IFoA)
show that the increase in the mortality rate in 2016 has slightly
reduced overall life expectancy for the over 65s, down 1.3 per cent for
men, and 2 per cent for women.

According to Mercer,
the world’s largest human resources consulting firm, the shift has
removed around £28 billion of pension scheme liabilities from the
balance sheets of FTSE350 companies.

About Me

Writer and researcher at the Institute of Economic Affairs. Blogging in a personal capacity.
Author of Selfishness, Greed and Capitalism (2015), The Art of Suppression (2011), The Spirit Level Delusion (2010) and Velvet Glove, Iron Fist (2009).

"Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience."